Freedom for home owners?

Owning your own home is in some ways one of the most liberating experiences you can undertake. When you move from your parent’s home, or from a rented property, into your first home that you own, you have a range of important new freedoms. You can choose the paint and the wallpaper, have a cat or dog of your own, drill holes in the wall if you need to install items, or take a hammer to the non structural parts of the home and remodel them. You can invite who you like.

Government is always there to take some of the joy out of the experience. They want their pound of flesh before you move in, with their Stamp Duty demand, a tax on home ownership. They demand an annual levy or Council tax for you living in your own home. They require full plans and fees if you wish to make significant changes to the building. They may even have views on hedges, trees and fences around your garden.

A freedom manifesto would try to reduce the nagging and taxing demands government makes on homeowners, and would try to help more into home ownership. The present government has rightly made it easier to buy a home from the public sector where a tenant wishes to change to an owner. It has also launched its Help to buy scheme to enable more buyers to afford the deposit for a home of their own.

A freedom manifesto might include lower Stamp duties on lower priced parties, perhaps by making the thresholds points at which the marginal extra cost of the home is charged at the higher rate, not charged at the higher rate on the full amount. Local and national policies to keep Council taxes down are an important part of the drive to raise living standards by controlling domestic costs.

More planning flexibility for the homeowner, more access to finance for purchase, and less tax would be a good combination.

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52 Comments

Indeed the large and sudden jumps in stamp duty rates are absurd. Taxation of rental and owner occupied properties should be neutral. It used to be better fiscally to buy due to mortgage interest relief, but now with high stamp duty, legal costs, agents fees and the likes it can be better to rent unless you are fairly sure you will be staying in the same property for several years. Below about 10 years you might well still be better renting. There is a huge fiscal barrier to moving home in London and expensive areas with £50K-£300K+ of stamp duty on top of legals, agents fees and the likes. So people just do not move.

The solution is simple, free up planning, reduce OTT (green crap, tree preservation and other such PC nonsense) building controls and build more houses and flats (for both rental and sale). Get rid of stamp duty completely or certainly the higher rates and get rid of CGT for landlords to encourage investment by them. Miliband’s idiotic rent control will have the opposite effect.

Why is it that a farmer is permitted build 4000 pig houses without any planning but not one house for humans? There is really no shortage of land just government planning obstacles.

Alternatively get heart and soul to control the open door EU immigration and the resultant large population increases.

Of course the state sector is in the business of control, restrictions, licence fee, tax extraction and over regulation. The only control mechanism that the public has to stop this is through a single vote once every five years for an MPs. One vote over countless issues for MPs who will not even do what they promise anyway. The control mechanism is almost totally useless. More daft endless taxation, fees, restrictions and controls is the result and a shortage of homes.

The state sector will thus continue to parasite on the productive, restrict home building and enjoy about 50% more pay and pensions while they do so.

Not always that liberating when people like the Europhile, John Major can push mortgage rates up to 17%+ in his daft political attempts to stay in the idiotic ERM. Bank margins are high, perhaps about 2.5% and long term rates are likely to rise to perhaps 4% or so. Perhaps do your calculations at a 6.5% and it might not look all that attractive. When rentals can be say 3-5% of capital value and without all the stamp duty, insurance, maintenance and other costs and is far more flexible if you get a new jobs or other reason to move.

Lowering or dropping CGT on property owned for longer periods would encourage their sale and make more homes available for new owners, also keeping the boom under control. -But they want the money and it will stay.

Anyone thinking of putting their pension into BTL should realise that, with Ed’s 3 year tenancies, it will not be possible tp sell in less than 3 years. However, if the bucket arrives , your loved ones will have to find the IHT in a much shorter period and, unable to sell, may have to borrow or be made bankrupt by HMRC, who can now strip their remaining money from their savings account.

Freedom, when it comes to owning property in the UK, is a complete illusion. Owning any sort of property makes you a sitting target for all sorts of government extortion and should you fail to pay then you will rapidly find out that you don’t really own it at all. What we really are is a nation of rent paying tax slaves that have been propagandized into believing that we are not tax slaves. Medieval serfs only had to give up 10-20% of their labour to pay their masters, we give up an awful lot more than that.
If you want freedom then campaign for a law to stop property being taken from you if you cannot pay taxes. Then you would really own it.

Defaulters on Council Tax is reported recently to be increasing significantly, which is not a surprise. If you own your own home and choose not to afford this iniquitous and unfair tax you risk jail or selling up and renting. The cost of and financing Local Government is very disproportionate to the actual benefit for many, probably the vast majority over say sixty years of contributions. Over a quarter of Council Tax receipts goes to subsidise the bullet proof pensions of Council retirees. This is a political subject, which has electoral mileage but seems too hot to handle. Even the Libdums had a local income tax policy for a while but like the odd good idea they have it quickly was discarded.

Reply Extra income tax does not alter the fact that most people have to pay for local government. It would become another tax on effort and enterprise, another disincentive to work.

Reply to reply:
Wrong side of the coin again, Mr Redwood. If it wasn’t for the overmanning, over-regulation and high pay and pensions in local government, the need to pay that tax at all would evaporate.

The deficit is only deferred taxes so you can only reduce taxes (and the huge dead costs of taxes) if you get Cameron and Osborne to stop wasting money. Start with the green crap, overseas aid, the in three letters but totally dysfunctional N. H. S., duff schools and universities, the feckless, the PIGIS and IMF soft loans, the EU, mad counter productive wars (I see we will only be allowed to see someone’s idea of the gist of Blairs appalling actions) and thousands of other largely pointless quangos and activities ….

I don’t think the suggestion was to propose an extra income tax to pay for local government but rather a local income tax to replace the punitive and grossly unfair council tax. How can it be fair for an old age pensioner living on his/her own on a modest income to pay the same if not more than a house full of wage earning adults next door. Contributions towards local government should be based on one’s income and ability to pay and not on the value of a house someone may have lived in for the last forty or fifty years and it should NOT go towards providing pensions for local government employees, often pensions which they cannot afford for themselves.

Reply The single person enjoys a single person discount, and someone on low income can qualify for benefit to help with housing cost. The collective services provided like roads and refuse collection benefit all households.

reply to reply . surprised if you post this john but here goes. After 45 yr of work then retiring early through injury, being awarded just over £3 a day to live on (DWP) for a year — I was then told I qualify for NOTHING. Not a penny. I get the single rebate but that is all, yet what about all the thousands who have arrived here for a totally free taxpayer funded life. They instantly are awarded more than me (obviously, as I am of no worth whatsoever) for having contributed Zilch. Please please tell me how this can be considered “fair” or even reasonable – -plus I know I am not the only one by far. If I had not been able to get my works pension early I would have been penniless and homeless ( I own it). To be blunt I would have probably gone and done “something stupid”. But, when after 45 yr you are made to feel so worthless, by a govt that has been so eager to take your money off you, and throw it to foreigners who have purely come to sponge, then thoughts go that way. I am not, and never have been, as wealthy as most posters on here appear to be, some quoting paying tax more than my actual salary, but I am a decent person who doesn’t mind paying his share. Only another 2 and half yr till my state pension throws a bit more to me. Those previously mentioned people won’t have to worry about the roof over their heads. its paid for by the likes of me, who apparently is worth that famous stately home, …. hall.

The biggest freedom of all would be the right to build a house on your own land in the first place. It’s the Planning system that constrains supply resulting in ever higher prices.
It also bestows large windfall fortunes on those who own land that becomes eligible for development.

yep you can buy a good decent sized kit house fully built for about 80 K, the land would only cost about 50 K. its the planning system that stops this happening. the government could release a lot of plots on its own land for this use. just do it.

people would realise how over priced housing is with a little bit of this, which would be good for everyone.

For instance, if a tenant would like to redecorate and is prepared to do the work themselves with the council paying only for the cost of materials, then why not let them do so. That way the tenant would have a greater sense of “ownership” of their home, would be more likely to look after it better, and the cost to the council of maintaining their housing stock would be less.

On the topic of freedom, the Tax Payers’ Alliance inform us that : “It was Tax Freedom Day on Wednesday. Calculated by the Adam Smith Institute, it’s the day in the year when you finally start working for yourself and stop working for the taxman. It means that you will have worked 148 days of this year to fill Treasury coffers.”

I do not think they tax into account the huge compliance costs, accounting cost, motorist mugging, the wrong fiscal incentive costs and the many resultant distractions from useful productive activity caused by the appallingly bad & complex UK tax system in this freedom day calculation.

No government will scrap ‘Stamp Duty’ it contributes too much tax to the exchequor.
However a sensible government would see the ‘cliff-edge’ nature of the current system causes great difficulty for house selling.
Buy at £250,000 = 1% on half the value.
Buy at £250,001 = 3% on the whole value.
This exactly the reason homes valued around £275,000 are very difficult to sell. So the owner has a choice to make. Sell at the lower SD rate and lose out. Or bump up the price to (say) £300,000 and hope someone will buy. This in turn causes excessive house price inflation.

It does not forgive the anomoly in stamp duty thresholdsubut surely if you as a seller agree to pay the purchaser’s stamp duty then as a buyer you would negotiate the same deal. HM tax collector can not be held responsible for weakness on your part. In this instance no one should double pay.

In the grand scheme of things home owners and social tenants already have a fair amount of freedom.
If you want to win votes you need to think about freedoms for private tenants.
For instance it is a complete nonsense that folk cannot decorate their new baby’s room in pastel blue or pink, even if they promise to decorate it back to the traditional rented property neutral white before they move out. This is the sad reality for many private tenants.
It’s not good for the whole country that tenants can be surprised at the last minute by a refusal to extend a short term tenancy, especially when it happens mid their children’s academic year. For decent tenants with children I see no reason why landlords should not be restricted to ending the tenancy in the children’s summer holiday with plenty of notice. Messing up children’s education is not worth the minor extra convenience to landlords.
I think we should disregard tenant’s savings, up to the value of the average house in their area, when calculating benefits. Level the playing field with owner occupiers who can keep the wealth in their house equity while signing on. That money is the tenant’s retirement house as much as it is the home owners. It’s just another state manipulation encouraging folk to buy distorting the market.
As I’ve said before we need to encourage a whole new industry in long term home rental. Make the rental market more like Germany where you can rent long term with security of tenure.
There are a lot of bad rental agents about, their wide and various abuses of tenants are well documented on the web, we would do well to sort this out.
I would extend right to buy to private tenants. This is not as silly an idea as it seems!
Your freedom manifesto could also address the problems flat owners have with the property management agents, there is also lots of abuse going on there.
Your freedom manifesto could also remove the link between address and school and GP your family is allowed to use, get rid of the manipulation of house prices which is just reflecting the different quality of the school the residents are allocated by the state. Get this distortion sorted and instead give parents buying power in the relationship with schools, and patients buying power in the relationship with GP’s.
And so on.

Iain Gill: “It’s not good for the whole country that tenants can be surprised at the last minute by a refusal to extend a short term tenancy, especially when it happens mid their children’s academic year. ”

That’s why it’s called a ‘short term tenancy’.

Otherwise you end up with the situation of some properties in London where the rent is controlled and a tenant is paying 1950’s rent in 1980.

“I would extend right to buy to private tenants. This is not as silly an idea as it seems!”

It certainly seems rather silly. At a time when tenants became immovable objects the market for unfurnished accomodation dried up; this concept would totally choke off supply; however, the ubitiquous short term tenancy has led to an invasion of the property market by amateur buy-to-let landlords, some from overseas, leading to a property bubble, a famine in affordable homes for prospective first time buyers as well as many of the abuses you describe.

Private tenants tend not to vote Conservative. They generally don’t vote at all, and those that do go with Labour. The only Tory policy you’ll see in respect of private tenants is that of helping them buy through mortgage subsidies e.g. Help to Buy.

House prices are a reflection of supply and demand. At present we have demand, in part stoked by Government right to buy schemes which could make life very difficult for those who just qualify, but are in no position to finance interest hikes. Still Government is only around for five years so they do not care much for the long term consequences of their actions.
Apart from all the jolly schemes of Government to cream off a percentage every time a house is bought, lived in or sold, there is the question of supply. Not such a big problem were government capable of limiting immigration or taking the steps to ensure they could.
I have always thought that the brick by brick way in which we build houses is unbelievably inefficient. At the top end of the market HUF house and others show how it can be done by building houses less foundations and services in a factory. The swedes have been doing it for years, producing thermally efficient, quality controlled buildings with facades to individual tastes. Erection is measured in days rather than the months in the UK. Were we to adopt it we might get somewhere to live that matched our Toyota or Honda in quality.
Come to think of it we did this after WW2 with the prefab that answered a need for all those who had been bombed out of their homes. They lasted much longer than was intended so I would say the principal is proven.
It should also dramatically reduce the price of the house component, the other being land. Just think about it. The level of technology that goes into a £25,000 car far exceeds anything in a house so why should they be so expensive. I would submit that it is time and the labour component that jacks up the unit cost.
The final component cost is that of the land. It obviously varies considerably throughout the country and I know insufficient about it to offer solutions. With the exception of one however, and that is our desire to work in big centre city offices and commute there and back for two hours a day. In this day of instant communication why are not millions working at home via their computer. A home in a low land cost area for instance. Hope this is not too politically biased or controversial for your new diary regime.

lots of the cost of housing here is just additional costs of dealing with the inefficient planning system. plus the hidden taxes, such as new build estates needing to fund some social houses in order to be granted planning permission. those new social houses are given free to the state and are paid for by the buyers of the new houses. and lots of inefficiencies of cross subsidies and state manipulations of the market.

The cost of ownership and th cost of changing ownership are too high. These facts limit freedom of choice.

A shortage of property, versus demand for it, pushes prices up as we see in London and the south east. It is evident when comparing building costs per sq ft, or metre, versus the selling price per sq ft or metre. Planning regulations are to blame for this.

The cost of moving is now exorbitant because of stamp duty. Combined these facts of life are slowing down activity in the housing market in the south east. People stay put and/or put build a house extension rather than move.

If the landlord is a using the property to fund his pension, the OAPension not being enough to live on, a forced sale to tenant would be disastrous, as an effective rate of CGT on the increased inflated value would apply with much of the value lost. There would then be insufficient to buy another to rent and mortgages are difficult to find for older persons.

I have long argued that there should be a period of much lower CGT for landlords selling to owner occupiers. It would provide landlords with an exit route instead of the present CGT ratchet on their portfolios, and it would stop the inexorable rise of BTL tenure at the expense of owner occupiers: it takes 220,000 homes a year away from first time buyers.

The attitude of independence has a lot to do with home ownership and ought to be encouraged . It has become an enormous problem for the younger generation where I live because a plot of land ( currently available in my village with hardly enough room for a house to be built on it ) is on the market for £300,000 !! ( it may not sell !! ) . There seems to be no end to the “demand” cycle and ever willingness on the part of the mortgage providers ; rents have soared , rates are sky high , GP practices are over-loaded and schools are chock a block . If you add to this mixture the added problem immigration brings , is it any wonder the population are up in arms . Indeed , independence is a fine thing and worth fighting for . The EU exacerbates the frustrations in our lives and must be held at bay with all the powers we can muster . David Davis has recently highlighted his views on our problems in what I consider to be a very timely and sensible approach ; I hope he is taken seriously and given more appreciation in the near future .

Firstly we need to ask why ordinary houses have gone beyond the higher rate of stamp duty in recent years. This is largely due to vastly increased demand over limited supply of housing stock. Clearly it isn’t down to wage inflation.

This is also behind the bad landlording complained about in previous comments – these people can pick and choose from an endless supply of desperate renters and so treat them however they choose to.

Obviously there has been a sudden and unexpected impact on housing which, of course, it has nothing to do with the #1 issue of the day which, perhaps, should not be mentioned because it has not been included. Surely the greatest freedom of home owning in Britain is one of being able to become a home owner in one’s own country in the first place.

But then whose country is this ?

Is this an example of bloviation ? Thank goodness a few choice words and due democratic process is what we believe in – unlike the more ‘tactile’ sections of our society when they don’t get what they want, or hear an opinion which they dislike.

A reminder here that the only politician physically assaulted in the recent elections was the UKIP leader.

Lenders have been irresponsible in the past, and to be fair, borrowers have too, but whether the lender is lax or strict, it is the lender’s decision to grant a mortgage. The mortgagor should thus take more of the consequences when a mortgagee genuinely cannot make the repayments; that is to say mortgagees should have – the freedom – to hand the house to the mortgagor. I don’t know if this happens informally at present or not, but they should not have to suffer the long-term threat of repossession on top of being forced into attempting to solve what may be an insoluble problem. Indeed such a threat probably forces them into behaviours they would not otherwise adopt. This will give the mortgagor considerable incentive to help the mortgagee, and we should not therefore need government schemes and directives to achieve it. This should be considered a responsible act by the mortgagee and it should not count against them.

If you want to have a “theme” running through Government policy I think that you need to be careful and actually target the public sector. Freedom can mean different things to different perspectives. I think you need to take a more philosophical / constitutional view to flesh out the semantics of the word freedom.

Here’s a good example for example does freedom mean transparency or privacy? I would suggest public (sector) means transparency and the private (sector) means privacy. So public finances should be transparent but my private taxes should be private. It gets more subtle. My LTd company accounts should be public because the Government has provided limited liability. So you need to look at the big cases to determine the principles and the edge cases to sharpen up the semantics. Then apply these semantics to others cases to see what you come up with.

What’s interesting is when you look at this private / public distinction you can apply the principle of transparency vs. privacy across a lot of Government policy.

It’s a creative process. But in principle I completely agree with freedom. But I would absolutely say that freedom can mean different things. One dimension is the privacy/transparency distinction whilst another would be government vs self regulation. What would be the principle underlying that?

Abolish the hated Council Tax, abolish local government (socialist controlled whether Tory or Labour), abolish the Scottish Executive (all socialists) and pull out of the EU. Then we can have a fresh look at a Manifesto for Freedom.

I am now into year 3 of planning approval for a fairly modest extension. The process is simply unbeleivable. The people are perfectly nice and friendly and don’t strike me as being of below average intelligence but work at a pace and responsiveness which you simply never see in the Private sector, the reason being that any private company operating as the states planning authorities do would go bust. No wonder we have a housing shortage!

So looking at the doctors surgery. The public / private principles seem like the most important distinction. So first the Doctor uses public sector money – so where is the freedom principle? The question I have is that I understand you are talking about freedom to choose a GP but what about the principle behind allowing benefit tourism? I can see EU migrants would argue for a freedom too.

So it appears to me that freedom is not the bottom of the argument. Freedom and rights may appear as axioms – but really they are a lot like the concept of pleasure and pain. At first glance they appear as basal but under closer investigation they break down into other physiological processes.

So what Government needs is an understanding of freedom – plus the principles that restrict freedoms – what stops benefit tourism. I think one of the key points is that people will abuse freedoms – whether they are in the public sector abusing tax payers money or the private sector abusing tax payers money. So freedoms need to be balanced with transparency and rights to public money. Politicians having the right to spend our money are in the same positons as GPs or benefit tourists spending our money.

I think there needs to be a new Act of parliament setting out the rights of the public and public sector workers spending out money.

3/4 of the cost of housebuilding is government regulation. POart of this can be seen by the fact while on one side of a hedge land may cost £20,000 an acre, without planning permission, on the other side it can be £80,000 a plot (ie £640,000 an acre) with approval.

We should have modern, watertight, well insulated, high tech houses delivered from the factory in container sized modules and put up (or updataded) in a matter of hours.

I think I’ll need to build a house on or adjacent to the M25(N&S) and M40. Thats because I spent about 2 hours last week either parked on or crawling along them. Two simple journeys, there and back. The Dartford Tunnel toll queues are appalling.

Housing = tax and tax plus they are very expensive to buy, furnish and run. The taxes cannot be reduced much because of the state financial structure/debt. Everything else is loaded with VAT and that won’t go away. Council tax needs to be examined everywhere and I had hoped Eric Pickles may have moved on that more effectively. Perhaps now the leader has been getting it, it might happen? Don’t think so.

Then of course the housing build is inadequate particularly now the EU has opened all borders to the EU anybody. Not clever at all!

Parking on the Motorways is new to me, never thought I would see so many Queues/Delays on the overhead signaling (junctions). That is a surprise to me because having worked in a couple of police control centers nationally (briefly) I had the feeling they were erected to display the odd joke – not in use really.

My assessment is that for roads and housing there are too many people here. And on the increase it appears. Unfortunately, there is no catch up available because the/any long term plan, if there was one, has been overruled.

Abolishing stamp duty would likely be self-funding, but the Treasury is so institutionally left wing, it seems to be incapable of believing that lower taxation is ever a good (and economically beneficial) thing.

Are you aware, John, has there ever been a question asked in the house regarding the likely net tax take from abolishing Stamp Duty altogether? Such a study would be complex as the ripple effects would be huge in areas such as construction, retail sales and the ‘trades’.

Yes, wouldn’t we all want a house, but that is not my right and it’s not the job of govt to redirect resources away from others who may have different dreams to make it my right to own a house.

Who is the govt to tell us what our dreams are and to trample on some dreams to make others a reailty?

The arrogance of govt is breathtaking.

” But, unfortunately, law by no means
confines itself to its proper functions.
And when it has exceeded its proper
functions, it has not done so merely in
some inconsequential and debatable
matters. The law has gone further
than this; it has acted in direct
opposition to its own purpose. The law
has been used to destroy its own
objective: It has been applied to
annihilating the justice that it was
supposed to maintain; to limiting and
destroying rights which its real
purpose was to respect. The law has
placed the collective force at the
disposal of the unscrupulous who wish,
without risk, to exploit the person,
liberty, and property of others. It has
converted plunder into a right, in
order to protect plunder. And it has
converted lawful defense into a crime,
in order to punish lawful defense.
How has this perversion of the law
been accomplished? And what have
been the results?

The law has been perverted by the
influence of two entirely different
causes: stupid greed and false
philanthropy.” – Bastiat : The Law

I see Frank Field has been on LBC radio saying that mass migration into Britain has been a “cock up” that has been ignored by the political system. He couldn’t be more correct. Shame he wasn’t saying it louder earlier, I guess faced with electoral reality more MP’s will have to soon start admitting this.
I hope freedom from mass immigration is one of the freedoms on your list John?

hi john, i do not like help to buy,it bad for the people and good for the banks and the governments. How about going back to leasing houses. You could take 4 or 5 billion from rent sub and build houses for families.Say 20% of the houses value stays with the government at two and half percent a year for 99 years and mortgage for the rest with or without a deposit. The two and half percent can roll back into the plan so is self funded after 40 years. You can put your own terms in to the lease,

Mr.Redwood, when talking about property taxes, don’t forget Inheritance Tax. Most people regard it as profoundly unfair that the nil-rate band threshold has not kept up with property prices. In 1997, when the Conservatives left office, the average price of a semi-detached house in London was £110,000 and the nil-rate band for Inheritance Tax was £215,000. By January 2014 the average price had risen to £420,000, but the nil-rate band stands at £325,000, so that the taxman threatens to take a larger and larger share of your house when you die. Re-instating the promise from the last election of a £1million threshold would be a vote-winner for the Conservatives in 2015.

Its probably will never get up for obvious reasons but it would be better for young people to apply a tax on all housing stock on the basis of the rental value of that property. The owners would pay the tax not the renters.

But on the other hand the costs of buying a house , or at least the interest payments on borrowed money, could be offset against that tax either by a landlord or an owner occupier.

So in theory young people starting off wouldn’t pay any tax, or very little, because effectively their house was owned by the bank rather than themselves but as they got older and wealthier they would pay tax and which they could afford.

It would encourage older people to downsize to avoid paying tax and therefore free up housing stock for younger people. Also it would make sense to only buy a house to live in it rather than as some kind of investment.

The Government also needs to make it easier for people to invest in buy to let property, by extending business roll-over relief to buy-to-let portfolios. To relieve the housing shortage, there is need for new housing stock and it cannot all be bought by owner-occupiers – an extra bit of demand from investors will enable developers to sell new units quickly, making it possible for them to build more homes in a shorter time and make up for the fall in completions during the credit crunch.

Or we could just get rid of Stamp Duty entirely and replace it with a low rate of VAT on new construction.

Taxing transactions makes no sense because no wealth is created, whereas new houses most emphatically do create wealth.

About John Redwood

John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.